Since the Supreme Court's decision in In re Bilski in 2010, the computer industry has been struggling with the question of how to determine patent eligibility of software and business method patents under 35 U.S.C. § 101. In May 2013, the Court of Appeals for the Federal Circuit issued an en banc decision in CLS Bank v. Alice Corp., but even the Federal Circuit could not agree on the legal standard for determining patent eligibility for a computerized trading platform under 35 U.S.C. § 101. The Federal Circuit issued a non-precedential, per curiam decision and five separate opinions with no opinion gathering majority support for the legal rationale used to invalidate the claims at issue. The Supreme Court recently granted a writ of certiorari to review CLS Bank to answer the critical question of what types of computer-implemented inventions are eligible for patent protection.

Alice Corp.'s patents include claims directed to data processing systems, methods, and computer-readable media containing a program code for directing an exchange of obligations, all of which require a computer. The Federal Circuit held that Alice Corp.'s claims, despite requiring implementation via a computer, were "directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk." In particular, the Federal Circuit determined that the claims covered an abstract idea and that the claims did not contain "additional substantive limitations" that narrowed, confined, or otherwise tied down the claims so that they do not cover the "full abstract idea itself.” Therefore, the court held that the claims for the subject computerized trading platform were ineligible subject matter under 35 U.S.C. § 101, regardless of their characterization as a method, system, or computer readable medium. Yet, there was no majority support for this legal test, and no opinion in the Federal Circuit decision gathered majority support for its legal rationale in invalidating the claims at issue. While a majority of the Federal Circuit judges concluded that the particular method claims were invalid, the court was equally divided regarding whether systems claims should rise or fall together with the method claims under the patent eligibility analysis. Thus, the basis upon which to decide whether computer software related claims are eligible for patent protection remains murky and is now prime for Supreme Court review.

Because the Federal Circuit's decision in the case is divided and fails to provide clear rationale or guidance for the future, guidance by the Supreme Court is sorely needed. Based on some more recent decisions by the Federal Circuit, this absence of clear guidance is resulting in decisions where the outcome seems to be dependent on the makeup of the panel deciding the case. For example, in Ultramercial Inc. v. Hulu LLC, 722 F.3d 1335 (Fed. Cir. 2013), a Federal Circuit panel led by Judge Rader held that the method claims were patent-eligible under Section 101 despite the invention being based on an abstract idea. Judge Lourie concurred with the decision (although he wrote his own opinion) and agreed that there were substantive limitations that narrowed the claims and they were not routine or conventional steps. The court found that the invention was "likely to require intricate and complex computer programming [and a] specific application to the Internet and cyber-market environment." The Federal Circuit also held in Ultramercial that "at bottom, with a claim tied to a computer in a specific way, such that the computer plays a meaningful role in the performance of the claimed invention, it is as a matter of fact not likely to preempt virtually all uses of an underlying abstract idea, leaving the invention patent eligible." In another recent decision, Accenture Global Services GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013), Judge Lourie wrote the majority opinion and found the system claims to be invalid . He found that the system claims did not vary from the method claims that were found invalid, and there was nothing additional in the system claims to distinguish them or add to patentability. Judge Rader dissented and stated that the system claims were patentable as they did not preempt all ways of accomplishing the same result. The parties in Ultramercial are awaiting word on whether the Supreme Court will also grant the pending writ of certiorari filed in that case. Either way, the stage is set for meaningful developments in this critical area of law in 2014. Companies in the patent community are hoping to see clarification on the issue of whether software and business methods will be patentable and the types of claims that may best protect these innovations, which should resolve the types of disputes seen in Ultramercial and Accenture.

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.